In May 2025, the Net Zero Energy and Transport committee held four evidence sessions on the potential role of low carbon hydrogen at the Grangemouth industrial site. This blog looks at the current and potential future demand for low carbon hydrogen, while the challenges of producing and transporting low carbon hydrogen are set out in an accompanying blog post. How necessary is hydrogen for the achievement of net zero, in what sectors is it most likely to be needed, how much potential demand exists in Scotland, and how much of an export opportunity is there for hydrogen produced in Scotland?
There is a commonly cited chicken-and-egg relationship between hydrogen supply and demand; there is no demand if it cannot be supplied at low economic and carbon cost, but it is difficult to develop the industry required to lower costs and deliver low carbon production methods, without guaranteed demand.
Scottish and UK demand
Hydrogen is already produced and consumed in Scotland for use as a feedstock in chemical production, for example at the Grangemouth industrial site. This is so called grey hydrogen i.e. produced using steam methane (natural gas) reformation, and results in the emission of greenhouse gases (GHGs). Most current discussion of hydrogen, however, relates to the potential future demand for low carbon hydrogen, with much debate around the areas where it is necessary to use hydrogen for decarbonisation and those areas where there are better alternatives.
The Scottish Government’s Hydrogen Action Plan (2022) includes the following ‘hierarchy of uses’ for hydrogen:
The CCC’s UK-wide Seventh Carbon Budget (2025) says the following on hydrogen use:
‘by 2040, our Balanced Pathway sees hydrogen play a small but important role, particularly in industrial sectors such as ceramics and chemical production which may find it hard to electrify. Hydrogen also has an important role within the electricity supply sector as a source of long-term storable energy that can be dispatched when needed and as a feedstock for synthetic fuels. However, we see no role for hydrogen in buildings heating and only a very niche, if any, role in surface transport.’
There has however, been a substantial reduction in the forecast demand for hydrogen between the CCC’s sixth (published 2020) and seventh (2025) budget analyses. This results from greater electrification usage in industry, and no hydrogen for heating in buildings.
In 2021, the UK Hydrogen Strategy included estimates that 250-460 TWh of hydrogen could be needed across the economy by 2050 (20-35% of UK energy consumption). The Scottish Hydrogen Assessment from 2020 suggests that Scotland could deliver 21-126TWh of hydrogen per year by 2045, with up to 96TWh of hydrogen for export to Europe and the rest of the UK in the most ambitious scenario.
The following sections, look in detail at some of the sectors where the use of hydrogen for decarbonisation has been suggested.
Hydrogen in industry
Scottish Enterprise commissioned reports from Element Energy and Ricardo in 2023, on Hydrogen Demand In Scotland: A Mapping Of Industrial Applications. Hydrogen could be used for industrial processes which require direct high temperature heat, indirect heating (hydrogen combusted to heat water/steam) or as a feedstock for fertilisers, chemicals or pharmaceuticals.
In Scotland, theoretical potential hydrogen use is assessed as 13.5 TWh or 0.4Mt/year with the largest potential demand for hydrogen in the Oil and Gas Refining (report written prior to Grangemouth refinery closure), and Chemicals and Pharmaceuticals sectors, with these two totalling nearly two thirds of the assessed potential. It makes reference to the Scottish Government target of 5GW production capacity by 2030, saying this translates to about 0.45 Mt/year.
While the closure of the refinery at Grangemouth could impact this forecast demand, the proposals in Project Willow report on a future low carbon Grangemouth, could see several new sources of hydrogen demand. In the evidence it received on the 20th May, the NZET committee heard that if they reached their maximum potential the Project Willow proposals could require 14GW of hydrogen production capacity to meet their needs. The Scottish Enterprise report contains the following Table summarising industrial sub-sectors and their potential for hydrogen use:
Sector | Type of hydrogen use case(s) | Alternative technologies | Notes on hydrogen usage potential and likelihood |
Chemical & pharmaceuticals | Indirect heating processes and, Chemical feedstock. | Electrification, CCUS | Industrial heating requirements could be met both by electrification or hydrogen, though some processes also require hydrogen as a feedstock |
Oil and gas refining | Indirect heating processes. | CCUS, electrification | Refineries use hydrogen and have many energy uses, showing a strong potential for hydrogen use |
Cement | Direct heating processes. | Biomass, CCUS | Due to the process emissions, CCUS is more likely to be used as a decarbonisation pathway |
Fertilisers | Indirect heating processes and, Chemical feedstock. | Electrification, alternative fuels | Hydrogen may be produced on site before conversion into ammonia, so this may not be a source of additional hydrogen usage |
Glass | Direct heating processes. | Electric furnaces | High temperatures mean that hydrogen may be better suited than electrification, though issues remain over flame characteristics |
Paper and pulp | Indirect heating processes and, Direct heating processes. | Biomass, waste-derived fuels | Many sites have moved to alternative fuels e.g., biomass to partially decarbonise their operations, so there is less ‘push’ to switch to hydrogen |
Distilleries | Indirect heating processes. | Electrification, biomass | The Scottish Whisky Association found that hydrogen will have a significant role to play in all net zero sectoral pathways |
Food & drink | Indirect heating processes and, Direct heating processes. | Electrification | Unique subsector processes and equipment may impair the potential for hydrogen to replace some existing natural gas fired appliances |
Power Generation | Indirect heating processes. | CCUS, Renewables | The only CCGT power plant in Scotland (Peterhead) has chosen to pursue CCUS and so is unlikely to be a source of hydrogen usage |
Non-residential heating | Indirect heating processes. | Electrification | SG policy does not prioritise hydrogen for heating in buildings, but there may be edge-cases |
Large Events and Construction | Indirect heating processes. | Electrification, Biofuels | Currently met through diesel powered generators, with hydrogen being seen as a viable alternative. Batteries and biofuels are potential alternatives. |
As mentioned, there is a complex relationship between demand and supply with guaranteed demand needed to bring forward supply. There are potential security of supply concerns for industrial businesses that switch to hydrogen, with industrial processes typically run continuously and needing a constant, secure supply if switching to hydrogen.
In the words of the CCC:
‘The need for hydrogen supply and demand to grow in tandem creates coordination challenges to ensure that there is both a sufficient market for the low carbon hydrogen production and sufficient low-carbon production to meet new hydrogen demands.’
Policy suggestions to address this include policies that mandate demand. For example, the Dutch government have approved a 4% mandate for green hydrogen in industry. More controversially in Britain, there are suggestions that hydrogen could be blended in the existing gas grid (in order to stimulate demand, rather than as long term solution to heat decarbonisation): The CCC set out:
‘blending of hydrogen with fossil gas could provide a flexible demand for hydrogen, whether in power plants or in the gas grid in small proportions – current estimates are that up to 7% hydrogen by energy (equating to 20% by volume) could be blended into the gas grid without changes being required to gas appliances.’
In the NZET evidence sessions, blending was cited as a stepping stone for the industry, acting as a guaranteed source of demand to incentivise supply start-ups. The UK Under Secretary of State for Energy told the EFW committee on the 21 May 2025 that the UK Government was ‘broadly in favour of some kind of blending, we’re just looking at how that decision will be made’.
Hydrogen for electricity and as a storage medium
The CCC’s Seventh Carbon Budget states that
- ‘Hydrogen also has an important role within the electricity supply sector as a source of long-term storable energy that can be dispatched when needed and as a feedstock for synthetic fuels.
CCC scenarios for a clean power system in 2035 involve around 7% of power from dispatchable sources (electricity easily turned on or off whenever needed). While they are reluctant to ‘define the appropriate balance of hydrogen and gas CCS for low-carbon’ dispatchable sources, and they see ‘a mix of the two as likely to be sensible’, their Central Scenario does involve 14GW of hydrogen plants and 2GW of gas CCS plants. Their mix would involve purpose-built hydrogen plants and retrofitted gas plants.
SSE, the owners of the only gas power plant in Scotland (in Peterhead), are planning for this to be converted to utilise CCS and it ‘is unlikely to be a source of hydrogen usage’.
The Draft Energy Strategy and Just Transition Plan sets out:
- ‘Hydrogen could also play a useful role in delivering large-scale and long-term energy storage in an integrated energy system and has the potential to replace or augment the critical balancing and resilience services that natural gas storage provides to the energy system today. It can help address intermittency of renewables through its production by electrolysis at times of excess green electricity supply. Hydrogen electrolysers co-located with renewables or deployed at scale in strategic locations will enable this.
Hydrogen demand in the electricity sector, as a back up to intermittent renewables, will, unlike in other sectors, be highly variable, necessitating significant hydrogen storage. There are different options for storage, including depleted gas fields and aquifers, but it is onshore, underground salt caverns (man-made cavities in salt mines) which are thought to be the most suitable by the UK Government. The volume of hydrogen that can be stored in British salt caverns is thought to be a ‘significant strategic advantage’ by the Government. The siting of hydrogen power plants may be influenced by the location of hydrogen storage and the most suitable British salt caverns are located outside in Scotland. The CCC’s Scottish Carbon Budget Analysis states that ‘our Balanced Pathway does not build any low-carbon dispatchable capacity (hydrogen power plants) in Scotland.’
Hydrogen for heating
The Scottish Government have in recent years largely dismissed the prospect of hydrogen for heating. In the Draft Energy Strategy and Just Transition Plan (published Jan 2023, and Final Plan has still not been published) they set out the following on the potential uses of hydrogen in a net zero Scotland:
‘We do not consider that hydrogen will play a central role in the overall decarbonisation of domestic heat and therefore we cannot afford to delay action to decarbonise homes this decade through other available technologies.’
This resonates with the views of both the National Infrastructure Commission (NIC) and the CCC. The NIC concluded in 2023 that:
‘the government should not support the rollout of hydrogen heating’
Although not discounting the potential for solely commercial developments, their assessment concluded that scenarios with greater hydrogen heating would be more costly, more environmentally damaging and less resilient.
In their recent advice on Scottish Carbon Budgets, the CCC sets out:
‘In our pathway, low-carbon heating is all electric with no role for hydrogen in home heating.’
This is a change from the Sixth Carbon Budget advice for the UK, which saw some hydrogen for heating near industrial clusters.
Regulation of gas networks is a reserved matter, and the UK Government has earmarked 2026 as the point at which ‘strategic decisions on the role of hydrogen for heat’ will be made. The Scottish Government has requested ‘a clear and fast decision on the future role of our gas networks’. In 2023, the last UK Government, set out that there might only ‘be a small role in some localised areas’.
There are some technical questions about the viability of converting the existing gas infrastructure to carry hydrogen, and there are trials going on to assess the feasibility. Scottish Gas Networks (SGN) have been carrying out a trial of hydrogen for home heating, called H100, at Levenmouth in Fife. As the NIC point out ‘being able to be used safely is the minimum threshold for hydrogen heating’.
It is the operational costs of using hydrogen for heating that are seen as the larger obstacle. The NIC assume that for the average home there will be heating costs of £1,320 with a heat pump and £1,550 – £2,370 with a hydrogen boiler. A regularly cited analysis from Cornwall Insight suggests that hydrogen heating would be about 70% more expensive to run than exiting gas heating.
Hydrogen in the transport system
Hydrogen as a fuel for transport can be combusted in an internal combustion engine (ICE) or it can be used in a fuel cell, producing electricity to power the vehicle drive train. In the Hydrogen Action Plan hierarchy, light road vehicles are at the very low end of priority for hydrogen, with maritime small-vessels and rail only just above. Physically larger forms of transportation – heavy road vehicles and larger maritime vessels and aircraft are placed at around mid-table, and provide the much more likely potential demand.
Scottish Enterprise commissioned Ricardo consultants to assess the location, nature and scale of this possible hydrogen demand from transport. It includes a central estimate of 12.5 TWh of demand for hydrogen in Scottish transport (slightly less than their estimate of annual demand from Scottish industry ; see above). Shipping is responsible for 37% of this, Heavy Good Vehicles (HGVs) for 19%, Ferries for 14% and Aviation for 11%.
In Shipping, the report selects ammonia (derived from hydrogen) as the dominant zero carbon fuel due to the low cost of retrofitting ships, higher energy density (relative to hydrogen) and low cost (relative to methanol). For ferries, a role is seen for hydrogen or a derivative in the longer routes with larger vessels e.g. Cairnryan to Larne. The report cites the Small Vessel Replacement Programme as demonstrating that battery electric ferries are the best option for shorter routes (journeys less than 40km are assumed to reply on electrification).
HGVs are a large source of demand, but electric HGVs are seen as being potentially in competition with hydrogen fuel cell HGVs and that the overall demand is uncertain.
Aviation is seen as a particularly hard to decarbonise sector, where apart from short distance flights with less than 20 seats, battery electric aircraft are not seen as viable. Using liquid hydrogen as a possible low carbon aviation fuel has ‘only become accepted within the last few years.’ While liquid hydrogen fuel is seen as possibly having a role in short-medium haul flights, hydrogen could also play a role as a feedstock for e-kerosene i.e. one of the key components in the manufacture low carbon aviation fuel.
For rail, the report highlights that Scotland’s railway already has ‘around 76% of passenger rail and 45% of freight rail on electric traction’, and further electrification is planned. There is potential for hydrogen in more remote lines where electrification is not cost-efficient, and in rail freight.
The Draft Energy Strategy and Just Transition Plan sets out:
‘Our forecasts indicate that demand for hydrogen in the transport sector has the potential to increase to around 6 TWh a year by 2035. This is equivalent to around 80% of the diesel used by Heavy Goods Vehicles (HGVs) on Scotland’s roads in 2019. By 2045, this could be as high as 14.9 TWh.’
The CCC’s Seventh Carbon Budget finds ‘only a very niche, if any, role (for hydrogen) in surface transport.’
International demand
As highlighted in the accompanying blog on hydrogen supply and transport, the Scottish Government has ambitious plans for hydrogen export. It is, therefore, worth considering the expectation on hydrogen demand internationally.
In terms of the sectoral split, in their A Trading Nation – Realising Scotland’s Hydrogen Potential: plan for exports (2024) the Scottish Government set out that currently Industry is responsible for all demand but that by 2030 29% of demand will come from transport moving to 40% by 2050. Although Industry remains the dominant source in this period, other markets for power and heating are forecast to emerge.
Like natural gas, hydrogen export may be geographically constrained, with pipelines the most prominent means of transport. It is therefore the European market which is most relevant to Scottish export. In a Hydrogen Council report authored by McKinsey consultants, there is an estimate of hydrogen demand in Europe of 100Mt per year in 2050 (note previous estimation of 5GW of Scottish capacity producing 0.45 Mt/year). It is also worth noting in this analysis that by 2050 the UK is a country that consumes more than it produces.
Scottish Enterprise have published Scenarios for Clean Hydrogen Demand in Europe which focus on Northwestern European countries; Germany, the Netherlands, Belgium and England. The case for there being an export potential for Scotland depends on the scenario, with low case scenarios involving only domestic supply, and higher cases involving import/export from other European countries and North Africa.
It is also necessary to make a ‘distinction between hydrogen itself and hydrogen derivatives in Scotland’s place in the international market’ and whether Scotland should be seeking to export pure hydrogen, or whether it might be better to use hydrogen in the production of higher value products such as low carbon shipping and aviation fuels, as is set out in the Project Willow proposals for the Grangemouth industrial site. The NZET committee received mixed evidence on this point, with a possible barrier to the export of hydrogen derivatives being that Scottish products would be competing with those from further afield e.g. ammonia produced from very low cost solar in the Middle East.
Niall Kerr, SPICe